Homebuyers canceled their purchases with the highest interest rates in December, but what do they get? It is the sum of many parts and reflects the perfect storm of where we are today. Let’s be honest. Buying and selling a home has become much more nuanced than it used to be.
People and their situations are becoming more and more complex. And what about properties? Many are aging and in need of extensive repair, replacement, and in some cases complete overhaul. All of this doesn’t sit well with buyers and is causing them to reconsider.
I’m in the trenches between two coasts, analyzing what I’m seeing and hearing.
interest rate
The industry can throw as much money as it wants, but 6% interest rates (and sometimes higher, depending on the type of loan the buyer qualify for) are still too high. This remains a psychological barrier for many people, and while you may be able to pay the principal and interest, add on taxes and insurance and the total cost becomes scary.
Buyers often become apathetic and don’t see the value of what they paid.
The gambit of “fix the rate and marry the house” didn’t work. Many buyers are still so fixated on the “date” that they either can’t find a better property or the costs don’t make it worthwhile to refinance.
Some lenders are receiving refinances from buyers who bought in past years, but interest rates are nowhere near the 2026 rates many expected.
insurance premium
Insurance is at the forefront of real estate transactions, but more than six years ago it was almost an afterthought. Buyers were shopping around for insurance just before closing. Neither they nor their agents thought much of it.
Today is a different story. If you’re involved in market-sensitive insurance (and the list of increasingly insurance-sensitive markets continues to grow), you know what I’m talking about.
Depending on the location of the property and the type of property, insurance conditions may prevent buyers from viewing the property before they go to see it. During the contract, contract-breaking complications can arise, such as advance claims against the property or the buyer, making insurance difficult to obtain or potentially very expensive.
And what if the property has older systems that the insurance company might take issue with? If you don’t pay a higher premium, it’s game over.
Insurance companies are giving many buyers a reason to pause after signing a contract and reconsider whether to proceed with the contract.
HOA and condominium dues
These are rising faster than home prices, especially in condos, as a result of structural integrity requirements following the Surfside Condominium collapse in Florida, such as the cost of master insurance policies, special assessments for repair/replacement of major components, balcony inspection/repair (in California), and the list goes on.
Buyers may sign up for a condominium at an affordable price, but the monthly condominium dues will put them off the table. If your condo is not approved by Fannie Mae, you can expect higher down payments, higher interest rates, higher adjustable rate mortgages, and less favorable financing terms compared to fixed term mortgages.
Dues typically only go in one direction and increase over time, not to mention future appraisals, which can make buyers nervous.
Moving, remodeling, and repair costs
The cost of moving is nowhere near what it was before the pandemic. The same goes for renovations, where labor and material costs skyrocket. Buyers are factoring all of this into the picture, and it’s causing stress for many who are wondering, “Do I need to deal with this?”
Sellers still expect top dollar
This is the elephant in the room. While prices remain affordable, much resale inventory is at the point where big-ticket items such as roofs, air conditioning and heating systems, water heaters, and other major components need to be replaced.
This does not take into account any cosmetic alterations/updates that the purchaser may need to make. Many sellers remain disconnected from the realities of today’s costs associated with buying, maintaining, and owning a home and are frustrated by lower offers.
If the buyer actually closes on the deal, unless the home is above “deal,” the inspection will reveal too many red flags that the buyer doesn’t have the financial means to address.
Buyers have more options, especially for new construction
In a market with plenty of new construction options, existing homes face a tough comparison test. On the other hand, many buyers want a move-in ready home, but don’t want to live with construction noise and disturbance for months to come.
Many buyers like the idea of an established neighborhood with a mature landscape, but don’t want an older home. You might not think it’s all that bad if you sign up for an older home and end up with a lot of expensive repairs on top of the renovations you wanted to do, resulting in higher insurance premiums, or if you suddenly hear a little construction noise in your new neighborhood.
Buyers want better value for money
Overall home costs are so high that buyers are hitting the cancel button after inspections. Even though the house may have a lot of seemingly trivial things, in their mind, it all adds up to everything they wanted to do with the house. And what buyer plans to move in right away without making any changes?
The house they were excited about suddenly becomes unappealing during inspection, and things quickly go from heart-pounding with excitement to heart-wrenching with anxiety and uncertainty.
I don’t have the emotional space anymore
In simpler times, buyers were so enamored with a home that they overlooked its flaws. They didn’t think too much about the details. Interest rates are lower, insurance is less complicated, and so are people’s lives. Many buyers, after dipping their toe in the water, find it too risky and too expensive.
In a market where renting is more affordable than buying, potential buyers would rather play it safe and continue renting without the financial anxiety that comes with owning.
Is the onus on the agent or the consumer not following their advice?
There are many agents who are eager to advise their clients on the good, the bad, and the ugly before buying a home, or what to do before putting a home on the market.
Every seller has a story to tell today, but with a few exceptions, most sellers aren’t selling for happy reasons. Sales are currently being triggered by deaths, divorces, elderly sellers moving into assisted living, and sellers choosing to sell long-term rental properties for cash.
Many companies prefer to sell these “as is” because they don’t have the financial means or inclination to do repairs/replacements or pre-sale updates before putting them on the market.
Managing expectations is always an art, and while buyers and sellers may be listening, you never know if they actually understand.
Some may think you’re getting in the way of what they’re trying to do by letting them keep money while you lower the price or work on important repairs before it goes on the market. Ultimately it’s their decision, but if the buyer backs out, the agent suffers the consequences of being thwarted by resistance forces.
We are in a market of buyer’s truth and buyer’s revenge. Unless it’s the deal of the century, buyers refuse to overpay for anything that isn’t in top condition, and sellers usually won’t sell at that price. Many sellers continue to chase market value even when the property is out of contract.
The market isn’t punishing buyers for being cautious. You will be penalizing sellers who do not contact you. And until that gap closes, cancellation rates will continue to rise.
Cara Ameer is a licensed Coastal Agent with Coldwell Banker in California and Florida. You can follow her on Facebook or X (previously known as ). Twitter.
